This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

SEC's Carnegie Suit Claims Leaches Bled Investors Dry

Roughly a year after Carnegie Asset Management made a minitender offer for shares of Mattel (MAT), the Securities and Exchange Commission filed a lawsuit alleging that the firm's principals engaged in securities fraud.

Carnegie Investment Management and LMC Assets, run by Jeffrey and Hubert Leach, never paid investors who tendered Mattel shares in November of last year, the agency said. The brothers, according to the SEC suit and several related filings in Philadelphia bankruptcy courts, used the shares as collateral for margin loans to finance trading in other stocks.

Related Stories
Carnegie Investment's Mattel Disaster Points Up Dangers of Mini-Tenders
Tips for the Timid: How to Detect Financial Fraud and Other Stock Shenanigans
Barad Just Should Have Listened to Herb

The SEC suit, filed in U.S. District Court in Philadelphia, alleges the brothers had previously made similar offers for shares of the Fleming Cos. (FLM) and Fruit of the Loom (FTL). Minitender offers are solicitations made to buy less than 5% of a company's outstanding shares, and have become a concern for investors because the process isn't bound by the regulatory strictures of full-fledged tender offers, which require detailed filings.

The SEC asked the court to compel the Leach brothers, who established Carnegie as a Cayman Islands corporation and traded through tiny First Colonial Securities in Boca Raton, Fla., to return any gains and repay investor losses, which were estimated at $1.4 million.

The Leaches, who ran their operation from a small office in Philadelphia, made $4.5 million in unlawful profits, the SEC charges. That didn't stop Carnegie from filing for bankruptcy when First Colonial's clearing firm, PaineWebber, froze their account pending payment for the stock collected in the Mattel tender offer.

The SEC's suit alleges the Leach brothers' tender offers contained material omissions and false statements about the offer's intent, were structured without the use of any escrow account or independent receiving agent and failed to disclose they were unable to pay for the shares. It also claims they made false and misleading statements outside of the offering documents, such as pledging to pay for shares by a certain date, and not completing the transaction.

Attorneys for the Leaches could not be reached.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs